Zagat to aid Google’s local-ad push: analysts

BenjaminPimentel

SAN FRANCISCO (MarketWatch) — In gobbling up Zagat Survey LLC, Google is getting a quality brand in reviews for restaurants and other businesses that would help tap local-advertising markets, analysts said Thursday.

Google
GOOG, +0.48%
shares were up a fraction Thursday after the company announced the purchase in a blog post. “Zagat will be a cornerstone of our local offering — delighting people with their impressive array of reviews, ratings and insights, while enabling people everywhere to find extraordinary and ordinary experiences around the corner and around the world,” wrote Google vice president Marissa Mayer.

Zagat is one of the oldest and well-known firms that offer reviews, ratings of restaurants and other businesses, usually with the help of its readers and followers. Similar companies include Yelp and OpenTable Inc., which also offers online restaurant reservations.

In such a market, “Google is not first by any means,” analyst Tim Bajarin of Creative Strategies Inc. said in an interview. “But now they have a great brand to work with and great content. Given their reach, they can be a major competitor in that area very quickly.”

Zagat also “is a powerful, quality brand that likely could go well beyond its core-hospitality and food-service roots if pushed,” he added.

In an apparent reaction to Google’s move, shares of OpenTable
OPEN
tumbled more than 8% at $57.50 by Thursday’s close.

“We view this small by Google standards acquisition as consistent with Google’s attempts to further tap into local-advertising markets,” Citigroup analyst Mark Mahaney wrote in a note. “The risk here to OpenTable is that this marks Google’s attempt to compete directly with OpenTable in the restaurant-reservation segment.”

Yet Mahaney didn’t see that happening, saying that “although Google has thrown a few surprises by us recently, we see it as highly unlikely that Google would want to enter the salesforce-intensive/truck-roll/hardware & software-install reservation business.”

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